Alibaba purchases $590M minority stake in smartphone maker Meizu

Alibaba has invested a hefty $590 million into Chinese smartphone maker Meizu, which makes devices such as the MX4.
Aloysius Low/CNET

Chinese e-commerce giant Alibaba has just spent $590 million for a minority stake in Chinese smartphone maker Meizu. The deal opens up more hardware for the company's custom YunOS for mobile phones, while granting Meizu access to Alibaba's vast online distribution network.

The deal marks a renewed focus on hardware and mobile platform growth for the incredibly popular e-commerce giant, as well as a much-needed avenue for growth for the fledgling smartphone marker Meizu.

Meizu, based in Zhuhai, Guangdong, has 1,000 employees and makes smartphones mainly for the Chinese market, such as the recently reviewed MX4 . However, the company's estimated less than 2 percent market share pales in comparison to other more established players in their region, such as Xiaomi, Huawei and Lenovo.

"Meizu only has about 1 percent of the China smartphone market today, and in fact has been gearing up to use YunOS since October 2014. So it's not like this changes things for Alibaba overnight, nor is it a silver bullet in terms of making YunOS instantly more widespread. One has to wonder whether other device vendors are lined up in the pipeline for YunOS," said IDC Asia analyst Bryan Ma.

"Although, Meizu does have its own cult following of loyal fans." Ma said. "And it is one of the up-and-coming local Chinese vendors to keep an eye on, even if they are still in Xiaomi's shadow."

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The company also offers e-payment services, called Alipay, deals in logistics, digital media and cloud computing, and has search giant Yahoo on board as an investor.

"The investment in Meizu represents a significant expansion of the Alibaba Group ecosystem and an important step in our overall mobile strategy as we strive to bring users a wider array of mobile offerings and experiences," said Wang Jian, Chief Technology Officer of Alibaba Group in a press release.

Alibaba's YunOS (which means "cloud" in Mandarin) is also called Aliyun OS and the likely reason why Alibaba is investing in Meizu. The mobile operating system is an incompatible fork of Android, though pirated Android apps are available on the Aliyun app store. The OS is designed around cloud-based services, letting you access call data, messages and photos across a number of devices running the operating system.

Besides putting its mobile OS on Meizu's handsets (which currently run Android with Meizu's FlyMe OS skin on top), Alibaba will open its online shopping marketplaces such as Taobao as distribution channels for the devices.